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Reportedly, Facebook’s (FB - Analyst Report) new application ‘Home’ will be made available for Google’s (GOOG - Analyst Report) Android based smartphones from Apr 12 in the U.S. Users can download the latest app from Google’s app store and have their Facebook account as the phone’s cover screen.
Moreover, regular Facebook features such as commenting on updates and chatting with Facebook friends will be possible with ‘Home’. Video features are expected to be added in the near future. Additionally, Facebook has plans to launch ‘Home’ for Android-run tablets as well. Facebook’s ‘Home’ is compatible with HTC Corp.'s One X and One X Plus and Samsung's Galaxy S III and Galaxy Note 2.
The Home application might just be the catalyst that the company needs to generate incremental mobile ad revenues. In the last reported quarter, Facebook’s 23% ad revenues came from mobile. Facebook also stated that 680 million people accessed Facebook using mobile devices in Dec 2012, which was up 57% from the previous year period.
According to eMarketer, U.S. mobile ad spending is expected to grow 77% in 2013 to $7.29 billion from $4.11 in 2012. Thus, we expect Facebook’s initiatives in the mobile space to incrementally benefit the company going forward to attract new advertisers.
We believe that Facebook has significant growth opportunities in the online advertising format. Facebook’s massive user base and its ability to track personal details over time make it a formidable force in the online ad market.
Facebook can use this massive database to help advertisers target relevant ads going forward. Moreover, the company has acquired the Atlas Advertiser Suite from Microsoft (MSFT - Analyst Report) to strengthen its position in the online ad market. The company’s expansion in the mobile segment is impressive.
However, a volatile macroeconomic environment and increased investments to expand mobile offerings are expected to hurt margins in the near term. Competition from Google and Yahoo (YHOO - Analyst Report) in the display ad market is another headwind going forward.
Currently, Facebook has a Zacks Rank #3 (Hold).